Helical
Annual Report 1999

Plain-text annual report

HELICAL BAR PUBLIC LIMITED COMPANY REPORT & ACCOUNTS 1999 Contents Corporate Statement Chairman's Statement Review of Operations Financial Review Officers and Advisors Directors' Report Auditors' Report Consolidated Profit and Loss Account Balance Sheets Statement of Total Recognised Gains and Losses Consolidated Cash Flow Statement Notes to Financial Statements Ten Year Review Notice of Annual General Meeting Financial Calendar 1 2 4 11 12 13 19 20 21 22 23 24 41 42 Office investment at The Pavilion, Thames Ditton Corporate Statement Helical Bar plc is a property development and investment company. Our objective is to maximise growth in assets per share using a recurring stream of development and trading profits to build up the investment portfolio. Increase in shareholders funds pre-dividend £m 1999 1998 1997 1996 5.1 1995 11.3 35.3 38.2 17.6 Ordinary dividend per share Net asset value per share Pence 1999 1998 1997 1996 1995 Pence 10.0 1999 9.0 8.0 7.3 6.5 1998 1997 1996 1995 372 330 326 Note: Special dividends of 100.0p and 2.0p were declared in respect of the periods ended 31st March 1999 and 31st March 1997 respectively. 473 482 1 Chairman’s Statement Over the fifteen years to 31 March 1999 Helical has been one of only two property stocks to outperform the UK equity market, having generated average total returns for shareholders of 38.9% p.a.,* exceeding all other quoted property companies. Since the beginning of the present development cycle six years ago, Helical has produced average annual returns on equity of 24.1% and a total shareholder return of 383.7%, an annual rate of 25.1% compound, a good result compared with other companies in the small to mid cap indices and property groups generally. It remains Helical’s aim to enable shareholders to share in its success by a progressive dividend policy. Looking forward, we have made an encouraging start to the new financial year. We are maintaining the size of our development programme and continue to increase our investment portfolio, reinvesting the cash flows from completed developments.The benefit of the reduction in long term bond rates should increasingly be reflected in our investment portfolio values and with Helical's skills of providing both tenants and institutions with new product the company should continue to create above average returns. John Southwell Chairman 15th June 1999 Review of the results In spite of the Helical has had another good year. downturn in the autumn of last year our confidence in the future enabled us to declare, in January 1999, a 100p per share special dividend. We now recommend an increase of 11% in ordinary dividends for the year. Development profits have continued to rise, earnings per share have increased, the repositioned investment portfolio produced further substantial valuation surpluses and we have maintained the size of our development programme. Profits before tax for the year to 31 March 1999 were £20.0m, an increase of 8% over the previous year.They included net rental income of £18.5m (1998 £18.6m) and profits from development of £21.6m (1998 £16.7m). Net interest payable was £12.5m (1998 £14.2m) after capitalising interest of £2.1m (1998 £1.8m). After a 19% tax charge (1998 21%) profits increased to £16.1m (1998 £14.6m). Before the special dividend of £28.9m, retained profits for the year were £10.2m (1998 £8.0m). Your Board is recommending a final dividend of 6.0p per share (1998 5.5p) which, with the interim dividend of 4.0p (1998 3.5p), makes a total of 10.0p.This is an increase of 11% on the previous year's dividend of 9.0p, not taking into account the special dividend of 100p.The total of 10.0p per share is covered over 5 times by profits after tax. Net asset value per ordinary share was 473p.This compares with a net asset value per share on a diluted basis of 382p in 1998 after adjusting for the 100p special dividend.This figure takes no credit for any surplus of value in trading and development stock. *Source: Commerzbank 7th May 1999 2 Office development at The Arena, Bracknell 3 Review of Operations Developments It is our objective to provide an ongoing flow of development profits.This year has been one of consolidation for Helical Retail, which produced the bulk of the development profits in 1997/98, with substantially increased profits coming from the office development side of our business. Both teams continue to put together new schemes due to come to fruition in the early years of the new millennium. Development programme - end values Office Retail Industrial Total £m £m £m £m Completed programme Let and sold 1993-1999 231 113 14 358 Current programme Completed For completion in year to: 31 March 2000 31 March 2001 31 March 2002 161 197 140 5 - 7 12 86 28 39 14 - - 21 261 225 179 677 503 153 Offices During the year the Company pre-let and sold its most significant office development to date.The 260,000 sq. ft. development at 25 Chiswell Street, London EC1 was fully let to City Solicitors Slaughter and May, and forward funded with Despa, the German investment fund. Building work started in early 1999 and is expected to complete by December 2000. 4 A number of successful lettings has enabled the Company to take profits on developments completed during the year.The three buildings at The Arena, Bracknell (124,000 sq. ft.), funded with Scottish Widows, and the building at 171 Bath Road, Slough (28.000 sq. ft.), funded with Scottish Mutual, have all been let to information technology companies. Since the year end the two buildings at Windsor Dials, Windsor (66,000 sq. ft.), funded with clients of Argyll Property Asset Managers Ltd and due to be completed later this month, have been let to FM Insurance Co. Ltd and The Galileo Company, both UK subsidiaries of US Companies. Other lettings include approximately 80% of the space at 6 St Andrew Street, London EC4, (45,000 sq. ft.) to solicitors Speechly Bircham and forward sold to Shell Pension Fund.The last 5,000 sq. ft. at Blenheim House, Leeds is under offer. Looking forward our 35,000 sq. ft. development at 10 Mansion House Place, London EC4, funded with bank finance is due for completion later this month and the major 150,000 sq. ft. development at 100 Wood Street, London EC2, funded with Despa is due for completion early next year. Building work has commenced at the 28,000 sq. ft. scheme at 1 Farnham Road, Guildford, forward funded during the year with British Gas Pension Fund. Other office development sites held include the 60,000 sq. ft. site at One Plough Place, London EC4, where building work is expected to start during the year, and at Bunhill Row, London EC1, a 100,000 sq. ft. scheme next to the scheme at 25 Chiswell Street. We are purchasing a further site for a 76,000 sq. ft. scheme at 200 Hammersmith Road, London W6. Office development at Windsor Dials, Windsor Office development at One Plough Place, London EC4 5 Retail Helical Retail has spent much of the year concentrating on maximising returns from its very successful development programme, building it out and expanding to sites adjacent to existing developments. It completed the 150,000 sq.ft. Norfolk Retail Park, Norwich and the 122,000 sq.ft. Bolton Gate Retail Park, Bolton, both funded with Legal & General, while finishing the 60,000 sq.ft. Sixfields Retail Park at Northampton, funded with Hill Samuel. It will be completing the 80,000 sq.ft. pre-let George Hotel, Glasgow scheme in August this year for Hermes and the 220,000 sq.ft. Captain Cook Square, Middlesbrough scheme in late autumn for Norwich Union. It completed in six months a 12,000 sq.ft. retail unit as an extension to the Cattle Market, Leicester development for Porcelanosa. At Horns Road, Ilford a site was acquired for a 44,000 sq.ft. development, having pre-let 33,000 sq.ft to Toys R Us. Since the year end Helical Retail has sold the scheme to Merseyside Pension Fund. It is working on a further 150,000 sq.ft. extension to its Bolton scheme and a 20,000 sq.ft. extension to its Middlesbrough scheme. In Dorchester it has been awarded a 160,000 sq.ft. scheme to redevelop the town centre. Industrial The units at the 80,000 sq ft development at Newton Aycliffe, Co. Durham have now been sold or are under offer, and we are in advanced stages of negotiation with a tenant for our six acre site in Hayes, forward funded with Hill Samuel. Retail development at Norfolk Retail Park, Norwich HELICAL RETAIL Retail development at Sixfields Retail Park, Northampton 6 Retail development at Bolton Gate Retail Park, Bolton 7 Investment portfolio Successive rises in stamp duty have made trading decreasingly viable. Accordingly, our emphasis is now very much on adding value to the investment portfolio with trading stock reduced to 2% of the portfolio. Purchases of over £76 million were made during the period.These include offices at The Rotunda Complex in Camden, NW1 (50,000 sq. ft.);The Pavilion,Thames Ditton (42,000 sq. ft.); CBX11 and Midsummer Court, Milton Keynes (150,000 sq. ft.) and Dextra Court, Basingstoke (42,000 sq. ft.). In Camden we have taken surrenders and re-let two floors increasing rental values by a third since purchase.The Pavilion in Thames Ditton is a brand new building let on a fifteen year institutional lease to SHL acquired off an 8% net initial yield. Our purchase at Milton Keynes is a complex deal involving a 1990s headquarters building producing just under £1.2 million p.a. plus a development site for 15,000 sq ft of leisure part pre-let to Bass plus 23,000 sq ft of offices.The total accommodation has a rental value of around £2 million against a total cost of about £16 million.The Basingstoke office consists of late 1980s air conditioned offices at a passing rental of only £12 p.s.f. Turning to other sectors, a 120,000 sq ft retail park has been acquired in Weston-Super-Mare off rentals of only £6.50 p.s.f. Rental values look set to jump dramatically as an adjoining owner is in the process of achieving three lettings of £10-12 p.s.f. in similar standard accommodation. Finally, a 410,000 sq ft portfolio of predominantly 1990s built industrials has been acquired from Scottish Enterprise at a double figure entry yield to actively manage. Two principal investment properties were sold - our Bow Lane holdings in the City for £9.9 million (7% over valuation and 37% over purchase price in 1995) and some 1970s industrials in Alperton, London for £4 million (13% over valuation). Within the existing portfolio active management continues to generate rental growth with a surrender and re-letting at Capital House, Edgware Road showing a 40% increase in rental values. Comparable success has been achieved at 61 Southwark Street, SE1, and a similiar deal is in hand at 71 Kingsway, WC2. Further letting activity at Cheapside House, EC2, leaves a single floor to let plus significant reversionary potential on the prime retail frontage. Since the year end the company has purchased for £52 million 60 Sloane Avenue, London SW3, a flagship office and retail investment.The transaction reflected an equivalent yield of 7.5% off a conservative rental base and increases our exposure to a buoyant West End market. Book value Passing of portfolio net rents Square footage 000s 776 481 3,877 Average rent £ per sq.ft. 15.5 6.0 2.2 Void space 000s 20 48 266 £m 12.0 2.9 8.5 23.4 5,134 £m 185.2 41.9 88.6 315.7 34.2 17.6 367.5 The portfolio Office Retail Industrial Total income producing Developments Land and sites Michael Slade Managing Director 15th June 1999 8 Investment Portfolio Property values by location 1999 City 27.2% West End 21.3% North 19.9% Property values by location 1998 City 33.8% North 20.0% Property values by sector 1999 Office 61.4% Property values by sector 1998 Office 59.3% South 22.8% Midlands 8.7% West End 21.7% South 12.9% Midlands 11.6% Industrial 26.3% Retail 12.3% Industrial 28.7% Retail 12.0% 9 Retail development at the George Hotel, Glasgow Office development at No 1 Farnham Road, Guildford Retail investment at Weston Retail Park, Weston-Super-Mare Office investment at 60 Sloane Avenue, London SW3 10 Financial Review Profits Gross profits for the year were £39.0 million. These compare with gross profits for the year to 31 March 1998 of £38.8 million and include net rental income after property overheads of £18.0 million (1998 £18.6 million) and trading of £0.1 million (1998 £4.4 million). Our development programme contributed £21.6 million (1998 £16.7 million). The surplus over book value on sale of investment properties was £0.4 million (1998 £0.8 million). Interest paid on borrowings, net of interest received on cash balances decreased from £14.2 million to £12.5 million.This was after capitalisation of £2.1 million of interest (1998 £1.8 million). Pre-tax profits rose by 8 per cent from £18.5 million to £20.0 million. With a tax charge of 19% (1998 21%) and a decreased minority interest of £1.2 million (1998 £2.3 million), profits before dividends increased by 22% to £15.0 million. Earnings per share on a diluted basis rose by 24% to 50.7p per share from 40.9p per share. Dividends The Board is recommending to members at the Annual General Meeting on 21 July 1999 a final dividend of 6.0p per share (1998 5.50p) to be paid on 23 July 1999 which, with the interim dividend of 4.0p, makes a total of 10.0p.This is an increase of 11% on the previous period's dividend of 9.0p.This is covered over 5 times by profits after tax calculated after conversion of the preference share capital. During the year a special dividend of 100.0p was declared as payable, in two tranches of 50.0p, to shareholders on the company’s share register on 5th March 1999.The first of these tranches was paid on 12th April 1999 and the second and last tranche will be paid on 29th October 1999. Net assets Helical's net assets at the year end were £142.1 million (1998 £140.4 million).The increase in value of investment properties of £19.9 million (1998 £23.6 million) was offset by the retained loss of £18.7 million caused by distributions of £33.6 million. Net assets per share of 473p compare with 382p in 1998 after adjusting for the special dividend of 100p per share and adjusting for dilution on the conversion of the preference shares. Borrowings and financial risk During the year Helical increased the levels of bank borrowings secured on investment properties to benefit from the rising investment market. It kept a high level of cash to take advantage of development opportunities such as the purchase of the site at Chiswell Street. At 31 March 1999 its borrowings amounted to £218.8 million (1998 £185.2 million). Helical seeks to manage financial risk to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably.The key financial risk to Helical is considered to be adverse movements in interest rates. It has insured itself against such interest rate movements by capping £160 million until 2006, £80 million at the rate of 6.5% and £80 million at 7.5%. In the meantime, using interest rate floors, it is able to benefit from the reduction of rates down to a level of 4.73% from July 1999 to January 2006 on £80 million and on a further £80 million down to 4.83% from January 2001 to January 2006. 11 Officers and Advisors Board of directors Registered office JOHN P. SOUTHWELL MA*† Chairman and Senior Non-executive, Aged 66 Appointed Chairman 1987 Director, James Cropper PLC Chairman, Lochain Patrick Holdings Ltd Consultant, Credit Lyonnais Securities Europe (UK) MICHAEL E. SLADE BSC (EST.MAN) FRICS FSVA Managing Director, Aged 52 Appointed Chief Executive 1986 NIGEL G. McNAIR SCOTT MA FCA FCT Finance Director, Aged 53 Appointed Finance Director 1987 Non-executive Chairman, Avocet Mining PLC Director, Govett Strategic Investment Trust IAN G. BUTLER CBE MA FCA*† Independent Non-executive Director, Aged 74 Appointed April 1993 Former director of Cookson Group plc Former member of Cadbury Committee C. GILES H. WEAVER FCA*† Independent Non-executive Director, Aged 53 Appointed September 1993 Managing Director, Murray Johnstone Ltd Director, James Finlay PLC Director, Charter European Trust PLC GERALD A. KAYE BSC (EST.MAN) FRICS Development Director, Aged 41 Appointed September 1994 P. MICHAEL BROWN BSC (EST.MAN) ARICS Investment Director, Aged 38 Appointed April 1998 * Member of Audit and Remuneration Committees † Member of Nominations and Appointments Committee Company Secretary and Registered Office TIMOTHY J. MURPHY ACA Company Secretary, Aged 39 Appointed March 1994 11-15 Farm Street, London W1X 8NP Telephone 0171 629 0113 Fax 0171 408 1666 Registrars IRG plc Bourne House 34 Beckenham Road Beckenham Kent BR3 4TU Solicitors Ashurst Morris Crisp Mishcon de Reya Olswang Titmuss Sainer Dechert Norton Rose Bankers Barclays Bank PLC Credit Lyonnais HypoVereinsbank Bank National Westminster Bank Plc Auditors Grant Thornton Grant Thornton House Melton Street Euston Square London NW1 2EP Joint stockbrokers Cazenove & Co. 12 Tokenhouse Yard London EC2R 7AN Credit Lyonnais Securities Europe (UK) Broadwalk House 5 Appold Street London EC2A 2DA Merchant Bankers Lazard Bros & Co Ltd 21 Moorfields London EC2P 2HT 12 Directors’ Report The directors present their report and financial statements for the year ended 31 March 1999. Principal activities The principal activity of the company is that of a holding company and the principal activities of the subsidiaries are property investment, dealing and development. A full review of these activities and the group’s future prospects are given in the Review of Operations on pages 4 to 8. Trading results The results for the year are set out on page 20. The profit on ordinary activities before taxation amounts to £20,044,000 (1998 £18,494,000). Share capital The detailed movements in share capital are set out in note 20 to these financial statements. At 31 March 1999 there were 29,611,697 ordinary 5p shares and 20,088 convertible cumulative redeemable preference shares in issue which were redeemed on 12 April 1999. Dividends A final dividend of 6.0p (1998 5.50p) per share is recommended for approval at the Annual General Meeting on 21 July 1999.The total ordinary dividends of 10.0p (1998 9.00p) per share, plus the special dividend of 100.00p announced on 18 January 1999, together with the preference dividends, amount to £33,631,000 (1998 £4,303,000). Donations Donations to charities amounted to £6,110 (1998 £18,285). A contribution of £10,000 (1998 £10,000) was made to the Conservative Party. Creditor payment policy The company’s policy is to settle all agreed liabilities within the terms established with suppliers. At 31 March 1999 there were 41 days' (1998 37 days) purchases outstanding in respect of the company's creditors. Auditors Grant Thornton offer themselves for reappointment as auditors in accordance with Section 385 of the Companies Act 1985. Substantial shareholdings At 15 June 1999 the shareholders listed in Table A had notified the company of a disclosable interest of 3% or more in the nominal value of the ordinary share capital of the company. Table A No. of ordinary shares % Schroder Investment Management Ltd 3,688,259 12.5 T R Property Investment Trust Jupiter Asset Management Fidelity Investments Hermes Investment Management 2,245,301 1,958,753 1,305,926 1,171,293 7.6 6.6 4.4 4.0 The interests of Michael Slade (10.2%) are noted below. Directors and their interests The directors who were in office during the year and their interests, all of which were beneficial, in the ordinary and preference shares are listed in Table B and note 20. Michael Brown was appointed a director on 9 April 1998. Table B Ordinary 5p shares Convertible cumulative redeemable preference shares 2012 31.03.99 01.04.98 31.03.99 1.04.98 J. P. Southwell 33,870 22,650 M. E. Slade 3,011,147 3,001,409 N. G. McNair Scott 622,827 561,191 I. G. Butler C.G.H. Weaver G. A. Kaye P. M. Brown 12,987 18,000 10,025 18,000 186,057 184,881 57,127 42,451* - - - - - - - 27,387 32,476 58,637 11,235 - - - Total directors' interests Percentage of issued share capital 3,942,015 3,840,607 - 129,735 13.3% 21.8% - 0.3% *Shares held on appointment. The Helical Bar Employees’ Share Ownership Plan Trust, referred to in note 13, owned 708,000 (1998 350,000) ordinary shares at 31 March 1999. On 4 June 1998 Michael Slade, at the end of the ten year maximum exercise period, exercised an option over 400,000 ordinary shares in accordance with the rules of the Senior Executive 1988 Share Option Scheme.The shares acquired were sold shortly after exercise. 13 On 8 June 1998 shares acquired by the Helical Bar Profit Sharing Scheme were allocated to directors and staff. The number of shares allocated to directors is disclosed in note 3. On 30 June 1998 Michael Brown purchased 13,500 ordinary shares. On 10 July 1998 Gerald Kaye exercised options over 50,000 ordinary 5p shares in accordance with the rules of the Ordinary 1986 Share Option Scheme and sold on that day the shares received. On 16 February 1999 the directors' interests in the convertible cumulative redeemable preference shares were converted into ordinary shares. Details of this conversion are included in note 20. On 26 February 1999 Nigel McNair Scott exercised options over 30,000 ordinary 5p shares under the rules of the Senior Executive 1988 Share Option Scheme and 15,000 ordinary 5p shares under the Ordinary 1986 Share Option Scheme. There have been no changes in the above directors’ interests in the period from 31 March 1999 to 15 June 1999. REMUNERATION COMMITTEE The membership of the committee is as follows: J. P. Southwell (Chairman) I. G. Butler C.G.H. Weaver None of the committee has any personal financial interest in the matters to be decided (other than as shareholders), potential conflicts of interest arising from cross-directorships nor any day-to-day involvement in running the business. The committee consults the Managing Director and Finance Director about its proposals and has access to professional advice from inside and outside the company. Policy on executive directors' remuneration Executive remuneration packages are designed to attract, motivate and retain directors of the calibre necessary to maintain the group's position as a market leader and to reward them for enhancing shareholder value and return. The performance measurement of the executive directors and the determination of their annual remuneration package is undertaken by the committee which consists solely of non-executive directors.There are three main elements of their remuneration package: i. ii. iii. basic annual salary and benefits in kind; annual bonus payments; share option incentives. Basic annual salary and benefits in kind Basic annual salaries for executive directors are reviewed having regard to individual performance and market practice. Executive directors' basic salaries were last reviewed in February 1997. Benefits in kind provided to executive directors include the provision of a company car and health insurance. Bonus schemes In June 1997 the committee reached agreement with the executive directors to establish a new bonus scheme following the cessation of the old scheme.This new scheme operated from 1 April 1997 and will continue until 31 March 2002. A bonus will be payable under this scheme only if there is an increase in the net asset value of the company and that increase is greater than that achieved by the upper quartile of the Investment Property Databank Index for capital growth of all properties, an ungeared benchmark. If achieved the bonus is payable in cash and is calculated in bands, the amount of bonus increasing with the level of outperformance. Among other constraints, the committee may restrict the bonus if payment would affect the financial or trading position of the group.The executive directors in this bonus scheme for the period were Michael Slade, Nigel McNair Scott, Gerald Kaye and Michael Brown. Additional bonuses were awarded by the committee in recognition of the performances of the development director, Gerald Kaye and the investment director, Michael Brown. Share options The company operated four share option schemes during the year. The Inland Revenue approved Ordinary 1986 Share Option Scheme ceased to be able to grant new options in December 1996 and following the 14 exercise during the year of the last remaining options this scheme no longer exists. The scheme was replaced by a new Inland Revenue approved scheme, the Helical Bar 1999 Approved Share Option Scheme, which received shareholder approval on 16 February 1999 and Inland Revenue approval in March 1999. Under this scheme options up to a maximum value of £30,000 per individual may be granted and options granted to directors in respect of this scheme are included in note 20. The ability of the Senior Executive 1988 Share Option Scheme to grant options was extended at the 1997 Annual General Meeting to 7 June 2001 but only in respect of options to purchase shares held by the Helical Bar Employees Share Ownership Plan Trust. Consequently, a new scheme, the Helical Bar 1999 Share Option Scheme, was established and also received shareholder approval on 16 February 1999. Under this scheme the aggregate market value of shares issued or issuable to an individual under this and other option schemes may not exceed eight times his annual earnings. Share options granted in respect of this scheme are included in note 20.The 1988 scheme can no longer grant any new options. The principal terms of the two new schemes do not differ in any material way from the schemes they replace, as regards matters such as eligibility, the determination of the exercise price, individual limits and anti-dilution provisions.The performance criteria has, however, been changed from a criteria which required the Company's percentage increase in net asset value per share to exceed the upper quartile of the Investment Property Databank Total Return Index over the relevant performance period to one which requires total shareholder return over a set period to exceed a certain percentile of the aggregate performance of companies in the Property Sector Index of the FTSE All Share Index. For the approved scheme the relevant period is three years and the 50th percentile. For the unapproved scheme the relevant period is five years and the 75th percentile. The Committee considers that these share options, coupled with the associated performance measures, will continue to provide the most effective method of longer term incentivisation for the key executives of the company. Service contracts The service contract of Michael Brown is for three years from 8 September 1997, the date of his commencement of employment at the company. The length of this service contract does not comply with the Combined Code but was agreed with Michael Brown, prior to his appointment as director, as part of his remuneration package.The unexpired term of his contract is 15 months. The service contracts of the remaining executive directors noted in Table B commenced on 1 July 1997 and have a one year notice period. Pension contributions The company makes annual contributions into a Small Self Administered Pension Scheme on behalf of Michael Slade and Nigel McNair Scott. Re-election Messrs J. P. Southwell and C.G.H. Weaver are due to retire by rotation and offer themselves for re- election. Non executive directors The remuneration of the non executive directors is determined by the Board within the limits set out in the Articles of Association. Non executive directors cannot participate in any of the company's share option schemes. Non executive directors do not have a contract of service. Details of directors' remuneration-share options This report should be read in conjunction with notes 3 and 20 to the financial statements which also form part of this report. Full details of all elements of the remuneration package of each director are given in note 3 to the financial statements. Details of directors' share options are given in note 20 to the financial statements. On behalf of the Board J. P. Southwell Director 15th June 1999 15 Corporate Governance Application of principles Directors' remuneration The company has applied the principles of good governance contained in the Report of the Committee on Corporate Governance (the Hampel Committee) except with regard to the length of service contract of Michael Brown as referred to below. The company recognises that directors' remuneration is of legitimate concern to the shareholders and is committed to following current best practice.The policy of the company is to provide sufficient levels of remuneration to attract, retain and motivate executive directors. Directors The company supports the concept of an effective board leading and controlling the company.The Board is responsible for approving company policy and strategy. It meets three monthly and has a schedule of matters specifically reserved to it for decision. Management supply the Board with appropriate and timely information and the directors are free to seek any further information they consider necessary. All directors have access to advice from the company secretary and independent professionals at the company's expense.Training is available for new directors and other directors as necessary. The Board consists of four executive directors who hold the key operational positions in the company and three non executive directors, who bring a breadth of experience and knowledge, of whom all are independent of management and any business or other relationship which could interfere with the exercise of their independent judgement.This provides a balance whereby the Board's decision making cannot be dominated by an individual or small group.The Chairman of the Board is John Southwell and the company's business is run by Michael Slade, the Managing Director.The Board has named John Southwell as the senior independent non executive director.The Board members are described on page 12. All directors are subject to re-election every three years and, on appointment, at the first AGM after appointment. The Nomination Committee meets as required to select and recommend to the Board suitable candidates for both executive and non executive appointments to the Board. comprises John Southwell, Chairman of the Board (Chairman), and the two other non executive directors, Ian Butler and Giles Weaver. It The Remuneration Committee, which carries out the policy on behalf of the Board, comprises John Southwell (Chairman), Ian Butler and Giles Weaver, all of whom are independent non executive directors. It meets twice a year. As well as considering conditions in the group as a whole, the Committee takes into account the position of the company relative to other companies and is aware of what these companies are paying, though comparisons are treated with caution to avoid an upward ratchet in remuneration.The Committee consults the Managing Director and has access to professional advice. The remuneration packages of individual directors are structured so that the performance related elements form a significant proportion of the total and are designed to align their interests with those of the shareholders. Share options are designed so that they recognise the long term growth of the company. No director has a service contract of more than one year other than Michael Brown, whose contract commenced prior to his appointment to the Board. The remuneration of non executive directors is determined by a sub-committee of the Board comprising the Managing Director and the Finance Director. The Board's report on remuneration is on pages 14 and 15. It sets out the company's policy in detail and the full details of all elements in the remuneration package of each individual director. Relations with shareholders The company values the views of its shareholders and recognises their interest in the company's 16 strategy and performance, board membership and quality of management. It therefore holds regular meetings with its institutional shareholders to discuss objectives. The AGM is used to communicate with investors and they are encouraged to participate.The Chairmen of the Audit, Remuneration and Nomination Committees are available to answer questions. Separate resolutions are proposed on each issue so that they can be given proper consideration and there is a resolution to approve the annual report and accounts. Accountability and audit The Board presents a balanced and understandable assessment of the company's position and prospects in all interim and price- sensitive reports and reports to regulators as well as in the information required to be presented by statutory requirements.The responsibilities of the directors as regards the accounts are described on page 18, and that of the auditors on page 19. A statement on going concern is also on page 18. The Board is responsible for maintaining a sound system of internal control to safeguard shareholders' investment and the company's assets. A report on the annual review of the effectiveness of the system is on this page.This review has been undertaken in accordance with the guidance for directors on internal controls and financial reporting that was issued by the Rutteman Working Group in December 1994 pending the publication of guidance on compliance with the Code provision D.2.1 by the working party set up by the ICAEW.The Board keeps under review whether an internal audit function would add value to the company. The Audit Committee comprises Ian Butler and Giles Weaver, both of whom are independent non executive directors, and John Southwell, who is Chairman of the Board and a non executive director.The terms of reference of the Committee include keeping under review the scope and results of the external audit and its cost effectiveness.The Committee reviews the independence and objectivity of the external auditors. This includes reviewing the nature and extent of non audit services supplied by the external auditors to the company, seeking to balance objectivity and value for money. Compliance The company has complied throughout the year with the Code provisions set out in Section 1 of the Combined Code. In complying with Code provision D.2.1 on internal control, the company has undertaken a review in accordance with the guidance for directors on internal controls and financial reporting issued by the Rutteman Working Group. Internal control The Audit Committee have reviewed the operation and effectiveness of the group's system of internal control for the financial year and the period up to the date of approval of the financial statements.The review has been undertaken in accordance with the guidance for directors on internal controls and financial reporting that was issued by the Rutteman Working Group pending publication of new guidance. The directors are responsible for the group’s system of internal financial control.The system of internal financial control is designed to provide reasonable, but not absolute, assurance against material misstatement or loss. The key features of the group’s system of internal financial control are as follows: - - - - clearly defined organisational responsibilities and limits of authority; financial controls and review procedures; financial information systems including cash flow, profit and capital expenditure forecasts; an Audit Committee which meets with the Auditors at least twice a year and deals with any significant internal financial control matter. 17 Going concern After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Year 2000 Compliance As is well known, many computer and digital systems express dates using only the last two digits of the year, and these systems will require modification or replacement to accommodate the change in date arising from the end of the current century in order to avoid malfunctions and consequential widespread commercial disruption. The operation of our business depends not only on our computer systems, but also to some degree on those of our suppliers and customers. The company has conducted a review of its computer systems and from this has developed an action plan designed to address the key risks in advance of critical dates and without disruption to the underlying business.This review also considers the impact on our business of Year 2000 related problems experienced by our significant suppliers and customers. In appropriate cases we have initiated formal communication with those other parties. Given the complexity of the issue, it is not possible for any organisation to guarantee that no Year 2000 problems will arise because at least some level of failure may still occur. However, the Board believes that it will achieve an acceptable state of readiness and has allocated resources to deal promptly with significant failures on issues that might arise.The anticipated total cost of the review and the action arising out of it is not expected to be significant. Directors’ responsibilities for the financial statements Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing those financial statements, the directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and estimates that are - reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements. The directors are responsible for keeping proper accounting records, for safeguarding the assets of the group and for taking reasonable steps for the prevention and detection of fraud and other irregularities. Annual General Meeting The Annual General Meeting of the company will be held on 21 July 1999 at 11.30 a.m. at The Westbury, Conduit Street at New Bond Street, London W1A 4UH. There are four resolutions concerning special business.The first increases the Company’s authorised share capital by the creation of a further 11 million ordinary shares of 5p each, which provides your Board with further headroom for any future share issues (although your Board’s ability to issue further shares, other than pursuant to share options, will be subject to the limits in the two following resolutions).The second gives your Board the authority for a further five years to allot 9,870,560 shares (one- third of the existing issued share capital as at the date hereof).The third gives your Board the power for a further year to issue shares pursuant to a rights issue and a modest number (approximately 5% of the existing issued share capital as at the date hereof) for cash other than to existing shareholders.The fourth extends, for a further year, the authority given at the Annual General Meeting last year for the company to buy in, for cancellation, approximately 10 per cent of the ordinary share capital.There have been no purchases of shares since the last Annual General Meeting. By Order of the Board T. J. Murphy Secretary 15th June 1999 18 Auditor’s Report To the members of Helical Bar plc We have audited the financial statements on pages 20 to 40 which have been prepared under the accounting policies set out on pages 24 & 25. Respective responsibilities of directors and auditors The directors are responsible for preparing the Annual Report, including as described on page 18, the financial statements. Our responsibilities, as independent auditors, are established by statute, the Auditing Practices Board, the Listing Rules of the London Stock Exchange, and by our profession’s ethical guidance. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act. We also report to you if, in our opinion, the directors’ report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law on the Listing Rules regarding directors’ remuneration and transactions with the group is not disclosed. We review whether the statement on page 17, reflects the company’s compliance with those provisions of the Combined Code specified for our review by the Stock Exchange, and we report if it does not. We are not required to form an opinion on the effectiveness of the group’s corporate governance procedures or its internal controls. We read the other information contained in the Annual Report, including the corporate governance statement, and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Basis of opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by In forming our fraud or other irregularity or error. opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view of the state of the affairs of the company and the group as at 31 March 1999 and of the profit of the group for the year then ended and have been properly prepared in accordance with the Companies Act 1985. Grant Thornton Registered Auditors Chartered Accountants London 15th June 1999 19 Consolidated Profit & Loss Account Helical Bar plc and subsidiary undertakings for the year ended 31 March 1999 Turnover Cost of sales Gross profit Administrative expenses Operating profit Profit on sale of investment properties Profit on ordinary activities before interest Interest receivable Interest payable and similar charges Profit on ordinary activities before taxation Taxation Profit on ordinary activities after taxation Equity minority interests Profit for the year Dividends paid and proposed including non-equity Dividends not yet declared Retained (loss)/profit for the year By company By subsidiaries Earnings per share Diluted earnings per share Note 2 2 3 4 5 6 7 7 21 8 9 9 Year ended 31 March 1999 £000 Year ended 31 March 1998 £000 121,244 (82,240) 214,416 (175,641) 39,004 (6,860) 32,144 415 32,559 1,510 (14,025) 20,044 (3,899) 16,145 (1,175) 14,970 (33,631) - (18,661) (10,302) (8,359) 66.7p 50.7p 38,775 (6,904) 31,871 838 32,709 1,082 (15,297) 18,494 (3,884) 14,610 (2,322) 12,288 (3,903) (400) 7,985 24,824 (16,839) 55.6p 40.9p The notes on pages 24 to 40 form part of these financial statements. 20 Balance Sheets Helical Bar plc and subsidiary undertakings as at 31 March 1999 Fixed assets Intangible assets Tangible assets Investment property Investments Current assets Fixed assets for resale Stock and long term contracts Debtors Cash Creditors: amounts falling due within one year Group 31 March 1999 31 March 1998 Note £000 £000 10 11 12 13 14 15 576 915 332,457 4,359 617 899 250,718 1,934 338,307 254,168 525 35,054 40,148 44,310 1,025 24,712 43,004 65,496 Company 31 March 1999 31 March 1998 £000 - 896 - 6,545 7,441 - 31 121,491 31,297 £000 - 874 - 4,119 4,993 - - 97,980 36,787 120,037 134,237 152,819 134,767 16 (128,662) (103,011) (47,896) (22,803) Net current (liabilities)/assets (8,625) 31,226 104,923 111,964 Total assets less current liabilities Creditors: amounts falling due after more than one year 329,682 285,394 112,364 116,957 17 (187,576) (145,023) (19,858) (15,502) Capital and reserves Called-up share capital Share premium account Revaluation reserve Capital redemption reserve Other reserves Profit and loss account Shareholders’ funds Equity minority interests Shareholders’ funds Equity shareholders’ funds Non-equity shareholders’ funds 142,106 140,371 92,506 101,455 20 21 21 21 21 21 1,495 34,508 78,948 7,081 291 19,201 141,524 582 31,490 3,160 61,435 7,081 291 35,525 138,982 1,389 1,495 34,508 - 7,081 1,987 47,435 92,506 - 31,490 3,160 - 7,081 1,987 57,737 101,455 - 142,106 140,371 92,506 101,455 141,510 14 106,878 32,104 92,492 14 69,351 32,104 141,524 138,982 92,506 101,455 The financial statements were approved by the Board of Directors on 15th June 1999. M. E. Slade, N. G. McNair Scott – Directors The notes on pages 24 to 40 form part of these financial statements. 21 Statement of Total Recognised Gains and Losses Helical Bar plc and subsidiary undertakings for the year ended 31 March 1999 Statement of total recognised gains and losses Profit for the period after taxation Minority interest Surplus on revaluation of investment properties Total recognised gains and losses relating to the period Notes on historical cost profits and losses Reported profit on ordinary activities before taxation Realisation of property revaluation gains of previous periods Historical cost profit on ordinary activities before taxation Year ended Year ended 31 March 1999 31 March 1998 £000 £000 16,145 (1,175) 19,850 14,610 (2,322) 23,557 34,820 35,845 1999 £000 20,044 3,193 23,237 1998 £000 18,494 1,625 20,119 Historical cost (loss)/profit for the period retained (15,468) 9,610 Reconciliation of movements in shareholders' funds Profit for the period Dividends paid and proposed including non-equity Revaluation of investment property Issue of shares Expenses of share issue Net addition to shareholders' funds Opening shareholders' funds Closing shareholders' funds 1999 £000 1998 £000 14,970 (33,631) (18,661) 19,850 1,513 (160) 2,542 138,982 12,288 (3,903) 8,385 23,557 1,376 - 33,318 105,664 141,524 138,982 The notes on pages 24 to 40 form part of these financial statements. 22 Consolidated Cash Flow Statement Helical Bar plc and subsidiary undertakings for the year ended 31 March 1999 Net cash inflow from operating activities Returns on investment and servicing of finance Taxation Capital expenditure and financial investment Acquisitions Equity dividends paid Cash flow before management of liquid resources and financing Management of liquid resources Financing Issue of shares Increase/(decrease) in debt (Decrease)/increase in cash Note 22 23 23 23 24 Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash in the year Cash (inflow)/outflow from management of liquid resources Cash (inflow)/outflow from change in debt Debt arrangement expenses Liability acquired with subsidiary Movement in net debt in the year Net debt 1 April 1998 Net debt 31 March 1999 Year ended Year ended 31 March 1999 31 March 1998 £000 £000 27,969 92,969 (18,161) (19,338) (3,650) (2,910) (60,398) (736) - (1,220) (1,648) (1,745) (55,888) 67,020 10,110 (45,219) 1,352 33,324 1,376 (22,599) (11,102) 578 1999 £000 (11,102) (10,110) (33,324) (256) - 1998 £000 578 45,219 22,599 (301) (11,020) (54,792) (119,697) 57,075 (176,772) (174,489) (119,697) The notes on pages 24 to 40 form part of these financial statements. 23 Notes to Financial Statements 1. Accounting policies The financial statements have been prepared under the historical cost convention as modified by the revaluation of investment properties and in accordance with applicable accounting standards.The accounting policies have remained unchanged since the previous year, except as detailed in “Implementation of new accounting standards” below. Basis of consolidation The group financial statements consolidate those of the company and its subsidiary undertakings drawn up to 31 March 1999. Profits or losses on intra group transactions are eliminated in full. Turnover Turnover represents rental income and the proceeds from the sale of trading properties and developments. For funded developments, turnover comprises the increase in the valuation of work during the year. Income from the sale of trading properties is included in the profit and loss account when in the opinion of the directors a binding contract of sale exists. Depreciation Depreciation is calculated to write down the cost to residual value of all fixed assets, excluding investment properties, by equal annual instalments over their expected useful lives. The annual rates generally applicable are: - short leasehold property - leasehold improvements - vehicles & office equipment length of lease 10% 25% Developments The attributable profit on developments is recognised once their outcome can be assessed with reasonable certainty. case of developments funded by institutions this profit is recognised on the letting of the developments. In the Stock Stock is stated at the lower of cost and net realisable value. Long-term contract balances included in stock are stated at cost, after provision has been made for any foreseeable losses and the deduction of applicable payments on account. Deferred taxation Deferred tax is provided for under the liability method using the tax rates estimated to apply when the timing differences reverse, and is accounted for to the extent that it is probable that a liability or asset will crystallise. Interest capitalised on development properties Interest costs incurred on development properties are capitalised until the earliest of: - the date when the development becomes fully let; - the date when the income exceeds outgoings; - a date within two years of completion to allow for letting. Implementation of new accounting standards Over recent months, the Accounting Standards Board has issued a number of Financial Reporting Standards (“FRS”) and these financial statements comply with those standards. In particular, these financial statements reflect the requirements of FRS 13 on derivatives and other financial instruments and FRS 14 which makes certain small changes to the calculation of earnings per share under SSAP3. In line with FRS 14 the earnings per share calculation for the year to 31st March 1998 has been recalculated in accordance with the new basis. 24 Notes to Financial Statements Investment property Completed investment properties are included in the balance sheet at current market value. Any surplus arising is credited to the revaluation reserve, any temporary deficits are netted off against the remaining balance on the reserve. In accordance with the Statement of Standard Accounting Practice No. 19, investment properties are not depreciated but are valued by an external valuer at least every three years. In years where an external valuation is not commissioned, a valuation is undertaken by a suitably qualified member of the company’s staff. This policy represents a departure from statutory accounting principles which require depreciation to be provided on all fixed assets.The directors consider that this policy is necessary in order that the financial statements may give a true and fair view because current values and changes in current values are of prime importance rather than the calculation of systematic annual depreciation. Depreciation is only one of many factors affecting annual valuation and its effect cannot be quantified. Financing costs The costs of arranging finance for the group, including financial instruments entered into to protect against the effects of interest rate movements, are written off to the profit and loss account over the terms of and in proportion to the associated finance. Goodwill Goodwill arising on acquisition is treated as an intangible asset and the cost written off in equal instalments over its useful economic life, estimated to be fifteen years. Employees share ownership plan trust (the “Trust”) Shares in Helical Bar plc owned by the Trust are stated at cost. Any deficit arising in the future between the original cost of the shares and their net realisable value will be funded by the company. 2. Turnover and gross profit on ordinary activities before taxation The analysis of turnover and gross profit by function is as follows: Turnover Gross profit Year ended Year ended Year ended Year ended 31 March 1999 31 March 1998 31 March 1999 31 March 1998 Trading property sales Rental income Developments Other income and provisions Gross profit Central overheads Interest payable less receivable Profit before taxation and profit on sale of investment properties £000 95 21,482 96,622 3,045 £000 86,561 22,009 104,556 1,290 £000 72 18,475 21,601 (1,144) 39,004 (6,860) (12,515) £000 4,363 18,598 16,686 (872) 38,775 (6,904) (14,215) 19,629 17,656 All sales were within the UK. All turnover is attributable to continuing operations. An analysis of property assets can be found in notes 12 and 14 and the directors do not consider a further analysis of net assets to be appropriate. 25 Notes to Financial Statements 3. Administrative expenses Operating profit on ordinary activities is stated after: Staff costs Depreciation Amortisation of goodwill Amortisation of deferred loan arrangement expenses Auditors' remuneration: - audit fee - other fees Staff costs during the year: - salaries - social security costs - other pension costs Year ended Year ended 31 March 1999 31 March 1998 £000 £000 5,008 221 41 256 61 82 4,132 501 375 5,008 4,888 209 - 301 56 55 4,092 439 357 4,888 With the exception of the pension contributions referred to below, other pension costs relate to payments to individual pension plans. The average number of employees of the group during the year was: 26 (1998 26) Remuneration in respect of directors was as follows: Salary/ Fees £000 Benefits in kind £000 Bonus £000 Profit on exercise of 1999 share options Total £000 £000 Chairman J. P. Southwell Non-Executive Directors I. G. Butler C.G.H. Weaver (paid to a third party) Executive Directors M. E. Slade N. G. McNair Scott G. A. Kaye P. M. Brown 43 19 19 447 162 192 162 1,044 13 - - 24 15 14 16 82 - - - - - - 56 19 19 850 - 850 650 1,436 189 155 - 2,757 366 1,211 828 2,350 1,780 5,256 3,438 1998 Total £000 46 15 15 2,117 201 1,044 - Pensions 1999 Total £000 1998 Total £000 - - - 2 330 - - 332 - - - 2 290 - - 292 The pension contributions were paid into a Small Self Administered Scheme and include £300,000 bonus paid as contributions in respect of N.G. McNair Scott.The assets of this money purchase scheme are administered by trustees in a fund independent from the assets of the group. Michael Slade was the highest paid director during the year with a total remuneration, excluding pension contributions but including the profit on exercise of share options during the year, of £2,757,000 (1998 Michael Slade £2,117,000). 26 Notes to Financial Statements 3. Administrative expenses (continued) On 5 June 1998 the Helical Bar Profit Sharing Scheme purchased 14,000 ordinary shares in the company. On 8 June 1998 under the rules of the Scheme 14,202 shares were allocated to directors and employees of the company. The shares allocated to the directors of the company were as follows: M. E. Slade N. G. McNair Scott G. A. Kaye P. M. Brown 4. Sale of investment properties Sale of investment properties Book costs (note 12) Provision for permanent diminution in value Profit on disposal 5. Interest payable and similar charges On bank loans and overdrafts Finance arrangement costs Other interest and similar charges Interest capitalised 6. Taxation On group results for the year: - UK corporation tax at 19% (1998 21%) No. of shares 1,176 1,176 1,176 1,176 Price 680.0p 680.0p 680.0p 680.0p Year ended Year ended 31 March 1999 31 March 1998 £000 £000 15,446 (14,357) (674) 49,435 (48,597) - 415 838 1999 £000 14,097 256 1,760 (2,088) 1998 £000 15,023 301 1,819 (1,846) 14,025 15,297 1999 £000 3,899 3,899 1998 £000 3,884 3,884 The effective tax charge for the year was reduced from 31% through the availability of capital allowances. 27 Notes to Financial Statements 7. Dividends Attributable to equity share capital Ordinary - interim paid 4.00p (1998 3.50p) per share - final proposed 6.00p (1998 5.50p) per share Total 10.0p (1998 9.00p) per share - special payable 100.00p (1998 nil) per share Attributable to non-equity share capital 5.25p convertible cumulative redeemable preference shares 2012 of 70p each - dividends paid - dividends not yet declared Year ended Year ended 31 March 1999 31 March 1998 £000 £000 700 1,734 2,434 28,904 31,338 2,293 - 33,631 604 948 1,552 - 1,552 2,351 400 4,303 8. Parent company The company has taken advantage of section 230 of the Companies Act 1985 and has not included its own profit and loss account in the financial statements.The group profit after tax for the year includes a profit of £23,329,000 (1998 £29,127,000) which is dealt with in the financial statements of the parent company. 9. Earnings per share Earnings per share is based on the profit after tax and preference dividends of £12,677,000 (1998 £9,537,000) and a weighted average of 19,014,376 (1998 17,140,758) ordinary shares of 5p each in issue during the year. Diluted earnings per share are based on 29,552,075 (1998 28,962,534) ordinary shares of 5p, which include 10,127,830 ordinary shares representing the weighted average of the conversion of the preference shares and 409,869 ordinary shares representing the weighted average of the exercise of share options.The diluted earnings per share for 1998 have been restated to comply with Financial Reporting Standard 14. 10. Intangible fixed assets - goodwill Cost At 31 March 1999 and 31 March 1998 Depreciation At 1 April 1998 Provision for the year At 31 March 1999 Net book amount at 31 March 1999 Net book amount at 31 March 1998 Group £000 617 - 41 41 576 617 The goodwill arose on acquisition of CPP Investments Limited, a 100% subsidiary of Helical Bar plc.This goodwill is being written off in equal instalments over fifteen years. 28 Notes to Financial Statements 11. Tangible fixed assets Group Cost at 1 April 1998 Additions at cost Disposals Cost at 31 March 1999 Depreciation at 1 April 1998 Provision for the year Eliminated on disposals Depreciation at 31 March 1999 Net book amount at 31 March 1999 Net book amount at 31 March 1998 Company Cost at 1 April 1998 Additions at cost Disposals Cost at 31 March 1999 Depreciation at 1 April 1998 Provision for the year Eliminated on disposals Depreciation at 31 March 1999 Net book amount at 31 March 1999 Net book amount at 31 March 1998 Short leasehold property & improvements £000 Vehicles & office equipment £000 605 41 - 646 133 45 - 178 468 472 605 41 - 646 133 45 - 178 468 472 871 252 (178) 945 444 176 (122) 498 447 427 840 228 (146) 922 438 170 (114) 494 428 402 Total £000 1,476 293 (178) 1,591 577 221 (122) 676 915 899 1,445 269 (146) 1,568 571 215 (114) 672 896 874 29 Notes to Financial Statements 12. Investment property - group Valuation at 1 April 1998 Additions at cost Disposals (note 4) Permanent diminution in valuation (note 4) Revaluation (note 21) At 31 March 1999 Long Leasehold £000 42,750 199 - - 101 43,050 Freehold £000 Total £000 207,968 76,721 (14,357) (674) 19,749 250,718 76,920 (14,357) (674) 19,850 289,407 332,457 The investment property has been valued on an open market basis at 31 March 1999 as follows: Healey & Baker, International Real Estate Consultants Allsop & Co, Chartered Surveyors Knight Frank, Chartered Surveyors King Sturge & Co. Chartered Surveyors Directors’ valuation - investment property in course of development £000 245,375 24,000 21,450 13,045 28,587 332,457 The net surplus arising of £19,850,000 (1998 £23,557,000) has been transferred to the revaluation reserve. The historical cost of investment property is £258,188,000 (1998 £192,432,000). 13. Investments Shares in subsidiary undertakings at cost Employees' Share Ownership Plan Trust - own shares The movement in the year was as follows: At 1 April 1998 Acquired during year At 31 March 1999 Group Company 31 March 1999 31 March 1998 31 March 1999 31 March 1998 £000 £000 - 4,359 4,359 1999 £000 1,934 2,425 4,359 - 1,934 1,934 1998 £000 - 1,934 1,934 £000 2,186 4,359 6,545 1999 £000 4,119 2,426 6,545 £000 2,185 1,934 4,119 1998 £000 2,185 1,934 4,119 Following approval at the 1997 Annual General Meeting the Company established the Helical Bar Employees’ Share Ownership Plan Trust (the “Trust”) to be used as part of the remuneration arrangements for employees.The purpose of the Trust is to facilitate and encourage the ownership of shares by or for the benefit of employees by the acquisition and distribution of shares in the Company. On 5 June 1998 the Trust acquired 308,000 ordinary shares at a price of 680.0p and on 10 July 1998 the Trust acquired 50,000 ordinary shares at a price of 662.5p.The Trust currently owns 708,000 ordinary 5p shares in the Company. On 10 July 1998 purchase options were granted over 400,000 ordinary shares held by the Trust at an exercise price of 565.0p. On 8 March 1999 purchase options were granted over 93,000 ordinary shares held by the Trust at an exercise price of 442.5p. At 31 March 1999 the Trust held 9,000 ordinary shares over which no options had been granted. 30 Notes to Financial Statements The company's principal subsidiary undertakings, all of which have been consolidated, are: Name of undertaking Nature of business Percentage of ordinary share capital held Aycliffe and Peterlee Development Company Ltd Aycliffe and Peterlee Investment Company Ltd* Helical Bar (City Investments) Ltd* Helical Bar (CL) Investments Limited* Helical Bar Developments (South East) Ltd Helical Bar (Wales) Limited* Helical Properties Limited Helical Properties Investment Limited Intercontinental Land and Development Co. Ltd* Helical Bar Developments Ltd Helical Bar (Leeds) Ltd Helical (Strand) Ltd Helical Bar (Mansion House Place) Ltd Helical Bar (City Developments) Ltd Helical Bar Trustees Ltd CPP Investments Ltd* Helical Bar (Wood Street) Ltd 61 Southwark Street Ltd* Helical Properties Retail Ltd Helical Bar (CL) Ltd* Helical Properties (Basingstoke) Ltd CBX11 Ltd* The Portsmouth International Festival of the Sea (1998) Ltd Helical Properties (WSM) Ltd* Helical Bar (Oxford) Ltd Helical Retail Limited Helical Retail (RBS) Limited* Development and trading Investment Investment Investment Development and trading Development and trading Investment development and trading Investment Investment Investment Development Investment Investment Development Trustee of Profit Sharing Scheme Investment Development Investment Investment Investment Investment Investment Festival Organiser Investment Trading Development and trading Development and trading 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 75% 75% 75% 75% All principal subsidiary undertakings operate in the United Kingdom and are incorporated and registered in England and Wales. *Ordinary capital is held by a subsidiary undertaking. 31 Notes to Financial Statements 14. Stock and long term contracts Costs to date of long term contracts Properties held as trading stock Group 31 March 1999 31 March 1998 Company 31 March 1999 31 March 1998 £000 £000 £000 £000 27,715 7,339 35,054 14,551 10,161 24,712 31 - 31 - - - Interest on capital borrowed to finance construction is included in work-in-progress to the extent of £1,697,000 (1998 £862,000). Interest capitalised during the year amounted to £2,088,000 (1998 £1,846,000). 15. Debtors Trade debtors Taxation Amounts owed by subsidiary undertakings Other debtors Prepayments and accrued income Group Company 1999 £000 9,158 1,171 - 1,126 28,693 40,148 1998 £000 22,540 3,428 - 483 16,553 43,004 1999 £000 220 501 120,354 78 338 121,491 1998 £000 26 2,464 94,250 276 964 97,980 Included in prepayments and accrued income is an amount of £5,099,000 (1998 £nil) due after more than one year. 16. Creditors: amounts falling due within one year Bank overdrafts and term loans Trade creditors Taxation Social security costs and other taxation Other creditors Accruals and deferred income Dividends payable Group 1999 £000 1998 £000 Company 1999 £000 1998 £000 31,223 32,748 5,600 84 1,005 27,364 30,638 40,170 34,292 7,608 662 149 19,182 948 128,662 103,011 10,650 139 2,906 61 - 3,502 30,638 47,896 15,308 207 2,978 78 45 3,239 948 22,803 32 Notes to Financial Statements 17. Creditors: amounts falling due after more than one year Bank loans repayable within: - 1-2 years - 2-5 years - after 5 years Deferred arrangement costs Group 31 March 1999 31 March 1998 Company 31 March 1999 31 March 1998 £000 £000 £000 £000 2,035 34,275 152,746 189,056 (1,480) 2,325 8,834 135,484 146,643 (1,620) - 20,000 - 20,000 (142) - - 15,660 15,660 (158) 187,576 145,023 19,858 15,502 Bank overdrafts and term loans in creditors falling due within one year and after one year are secured against properties held by subsidiary undertakings to the value of £347,533,000 (1998 £242,771,000).These will be repayable when the underlying properties are sold. 18. Financing and financial instruments Short term debtors and creditors Short term debtors and creditors have been excluded from all the following disclosures. Bank overdraft and loans - maturity After 5 years From 2-5 years From 1-2 years Deferred arrangement costs Due after more than one year Due within one year 1999 £000 1998 £000 152,746 34,275 2,035 189,056 (1,480) 187,576 31,223 135,484 8,834 2,325 146,643 (1,620) 145,023 40,170 218,799 185,193 The group has various undrawn committed borrowing facilities.The facilities available at 31 March 1999 in respect of which all conditions precedent had been met were as follows: Expiring in one year or less Expiring in more than one year but not more than two years Expiring in more than two years Gearing Total borrowings Cash Net borrowings Gearing £000 33,403 14,025 6,646 54,074 1999 £000 218,799 (44,310) 1998 £000 185,193 (65,496) 174,489 119,697 123% 85% 33 Notes to Financial Statements 18. Financing and financial instruments (continued) 31 March 1999 Expiry £000 % 31 March 1998 Expiry Interest rates Fixed rate borrowings - fixed - fixed - fixed - swaps - swaps Weighted average Floating rate borrowings % 11.419 9.050 8.625 8.335 7.228 Nov. 2013 Feb. 2009 Sept. 2001 June 2000 July 1999 8.000 Oct. 2001 Total borrowings Deferred arrangement costs Provision for loan redemption charge Floating rate borrowings bear interest at rates based on LIBOR. 11.419 9.050 8.625 8.335 7.228 Nov. 2013 Feb. 2009 Sept. 2001 June 2000 July 1999 8.000 Oct. 2001 8,500 10,239 20,000 14,200 74,500 127,439 90,320 217,759 (1,480) 2,520 218,799 Hedging In addition to the fixed rates, borrowings are also hedged by the following financial instruments: Instrument Value £000 Rate % Commencement Current - cap - cap - cap Forward - cap - cap - collar - collar 12,500 12,500 40,000 30,000 50,000 80,000 80,000 9.000 8.500 8.500 9.150 9.050 4.830-7.500 4.730-6.500 - - - July 1999 July 1999 Jan. 2001 July 1999 £000 8,500 10,523 20,000 14,200 74,500 127,723 56,570 184,293 (1,620) 2,520 185,193 Expiry June 1999 June 1999 July 1999 Jan. 2001 Jan. 2001 Jan. 2006 Jan. 2006 Fair value of financial assets and financial liabilities Borrowings Interest rate swaps Other financial instruments 31 March 1999 Book Value £000 220,279 - (203) Fair Value £000 222,526 1,305 995 220,076 224,826 The fair value of financial assets is the book value. The fair value of financial liabilities represents the mark to market valuation at 31 March 1999. 34 Notes to Financial Statements 19. Deferred taxation A provision for deferred tax is not considered to be necessary. Amounts unprovided are: - unrealised capital gains - accelerated capital allowances - other timing differences - tax losses Group 31 March 1999 31 March 1998 Company 31 March 1999 31 March 1998 £000 £000 £000 £000 15,456 1,560 1,406 (6,797) 11,625 11,780 5,340 2,150 - 19,270 - - 33 - 33 - - 35 - 35 The amounts unprovided represent contingent liabilities at the balance sheet date and are calculated using a tax rate of 30%. No provision has been made for taxation which would accrue if the investment properties were disposed of at their revalued amounts.The amount unprovided is shown above under unrealised capital gains. 20. Share capital Authorised - 34,000,000 (1998 34,000,000) ordinary shares of 5p each - 45,996,768 (1998 45,996,768) 5.25p convertible cumulative redeemable preference shares 2012 of 70p each Allotted, called up and fully paid at 31 March 1999 Attributable to equity interests: - 29,611,697 (1998 17,593,637) ordinary shares of 5p each Attributable to non equity interests: - 20,088 (1998 43,728,585) 5.25p convertible cumulative redeemable preference shares 2012 of 70p each 1999 £000 1,700 32,198 33,898 1998 £000 1,700 32,198 33,898 1,481 880 14 1,495 30,610 31,490 Prior to the additional conversion date of 16 February 1999, referred to below, preference shareholders had the right to convert their shares into ordinary shares at the rate of approximately 25.65 ordinary shares for every 100 convertible preference shares. On 1 September 1998, 95,731 preference shares were converted into 24,555 ordinary shares. Following shareholder approval at the Extraordinary General Meeting held on 10 February 1999, the Articles of Association were amended to allow preference shareholders an additional conversion date of 16 February 1999 at an enhanced conversion rate of 26.365 ordinary shares for every 100 convertible preference shares. Conversion on that date enabled preference shareholders to benefit from the 100p special dividend payable to ordinary shareholders on the shareholders register on 5 March 1999 (the 'record date').The company received conversion notices representing over 95% of preference shares and, in accordance with its rights under the Articles, exercised its right to require the remaining preference shareholders to convert or elect for redemption of their shares by 3 March 1999. On this date 7 shareholders representing 20,088 had elected for their shares to be redeemed, such redemption occurring on 12 April 1999.The remaining preference shares were converted into ordinary shares which, together with those preference shares previously converted, represented over 99.9% of preference shares issued. 35 Notes to Financial Statements 20. Share capital (continued) Share Options At 1 April 1998 options over 1,860,000 ordinary shares in the company had been granted to directors and employees under the company's Share Option Schemes. During the year options over 495,000 ordinary shares were exercised and options to subscribe for 1,602,000 new shares were granted. In addition, options to purchase 493,000 shares from the Helical Bar Employees' Share Ownership Plan Trust were granted. Options over 3,460,000 ordinary shares in the company at 31 March 1999 were as follows: Senior executive 1988 share option scheme Subscription options Option period ending: - 9 March 2004 - 20 October 2004 - 10 July 2007 - 28 September 2007 - 26 November 2007 Purchase Options Option period ending: - 26 November 2004 - 9 July 2005 Helical Bar 1999 Share Option Scheme Subscription options Option period ending - 7 March 2009 Purchase options Option period ending - 7 March 2009 Helical Bar 1999 Approved Share Option Scheme Subscription options Option period ending - 7 March 2009 Exercise price per share p Number of shares 273.0 252.0 412.5 467.5 452.5 452.5 565.0 100,000 200,000 365,000 100,000 394,000 206,000 400,000 442.5 1,547,768 442.5 93,000 442.5 54,232 3,460,000 At the EGM held on 10 February 1999 shareholders approval was obtained to reduce the exercise price per share of outstanding options by an amount equal to the special dividend of 100p per share announced on 18 January 1999.This reduction is reflected in the exercise price of options noted above.This adjustment to the exercise price compensated option holders for the effects of the special dividend. 36 Notes to Financial Statements 20. Share capital (continued) The directors' interests in these Share Option Schemes during the year were as follows: Senior executive 1988 share option scheme At start of year Number of options exercised granted At end of year Exercise price Market price Date from at date of exercise which exercisable Subscription Options M E Slade N G McNair Scott G A Kaye P M Brown Purchase Options M E Slade N G McNair Scott P M Brown 400,000 394,000 30,000 250,000 100,000 200,000 100,000 6,000 400,000 50,000 100,000 - - - - - - - - - - - (400,000) - (30,000) - - - - - - - - - 394,000 - 250,000 100,000 200,000 100,000 6,000 400,000 50,000 100,000 321.0p 452.5p 71.0p 412.5p 273.0p 252.0p 467.5p 452.5p 565.0p 452.5p 452.5p 680.0p - 535.0p - - - - - - - - - 26.11.02 - 10.07.02 10.03.99 21.10.99 29.09.02 26.11.01 10.07.02 26.11.01 26.11.01 Expiry date - 26.11.07 - 10.07.07 09.03.04 20.10.04 28.09.07 26.11.04 10.07.05 26.11.04 26.11.04 Ordinary 1986 share option scheme N G McNair Scott G A Kaye At start of year 15,000 50,000 Number of options exercised (15,000) (50,000) granted - - At end of year - - Exercise price 204.0p 352.0p Market price Date from at date of exercise 535.0p 662.5p which exercisable - - Expiry date - - Helical Bar 1999 Share Option Scheme At start of year Number of options exercised granted At end of year Exercise price Market price Date from at date of exercise which exercisable Subscription options M E Slade N G McNair Scott G A Kaye P M Brown Purchase options N G McNair Scott G A Kaye - - - - - - 493,221 235,221 393,221 293,221 43,000 50,000 - - - - - - 493,221 235,221 393,221 293,221 43,000 50,000 442.5p 442.5p 442.5p 442.5p 442.5p 442.5p - - - - - - Expiry date 07.03.09 07.03.09 07.03.09 07.03.09 08.03.04 08.03.04 08.03.04 08.03.04 08.03.03 08.03.03 07.03.06 07.03.06 Helical Bar 1999 Approved Share Option Scheme M E Slade N G McNair Scott G A Kaye P M Brown At start of year - - - - Number of options exercised - - - - granted 6,779 6,779 6,779 6,779 At end of year 6,779 6,779 6,779 6,779 Exercise price 442.5p 442.5p 442.5p 442.5p Market price Date from at date of exercise - - - - which exercisable 08.03.02 08.03.02 08.03.02 08.03.02 Expiry date 07.03.99 07.03.99 07.03.99 07.03.99 There have been no changes in the above directors’ interests in the period to 15 June 1999. The market price of the ordinary shares at 31 March 1999 was 485.0p (1998 587.5p).This market price varied between 437.5p and 687.5p during the year. 37 Notes to Financial Statements 21. Share premium and reserves Group At 1 April 1998 Loss retained Revaluation of investment property Realised on disposals Permanent diminution in investment property valuation Premium on conversion of preference shares Premium on exercise of share options Expenses of share issue Share premium account £000 Capital redemption reserve £000 Other non- distributable reserves £000 Revaluation reserve £000 Profit & loss account £000 3,160 - - - - 30,021 1,487 (160) 7,081 - - - - - - - 291 - - - - - - - 61,435 - 19,850 (3,193) 35,525 (18,661) - 3,193 856 (856) - - - - - - At 31 March 1999 34,508 7,081 291 78,948 19,201 Company At 1 April 1998 Loss retained Premium on conversion of preference shares Premium on exercise of share options Expenses of share issue 3,160 - 30,021 1,487 (160) 7,081 - 1,987 - - - - - - - At 31 March 1999 34,508 7,081 1,987 - - - - - - 57,737 (10,302) - - - 47,435 22 . Reconciliation of operating profit to net cash inflow from operating activities Operating profit Depreciation of fixed assets Write down of fixed assets held for resale Loss on sale of fixed assets Amortisation of goodwill Decrease/(increase) in debtors Increase in creditors (Increase)/decrease in stocks Year ended Year ended 31 March 1999 31 March 1998 £000 £000 32,144 221 500 10 41 599 2,708 (8,254) 31,871 209 922 17 - (16,566) 11,821 64,695 Net cash inflow from operating activities 27,969 92,969 38 Notes to Financial Statements 23. Analysis of cash flows for headings netted in the cash flow statement Return on investments and servicing of finance Interest received Interest paid Non-equity dividends paid Taxation Tax received Tax paid Capital expenditure and financial investment Purchase of property Sale of property Purchase of tangible fixed assets Sale of fixed assets Purchase of fixed asset investment Year ended Year ended 31 March 1999 31 March 1998 £000 £000 1,510 (15,482) (4,189) 1,082 (16,483) (3,937) (18,161) (19,338) - (3,650) 48 (2,958) (3,650) (2,910) (73,172) 15,446 (293) 46 (2,425) (66,253) 68,075 (690) 66 (1,934) (60,398) (736) 24. Analysis of net debt Cash at bank Bank overdraft Debt due within one year Debt due after more than one year less: arrangement expenses At 1 April 1998 £000 Cash Flow £000 Other non cash changes £000 At 31 March 1999 £000 65,496 (43) (21,186) (26) 65,453 (21,212) (40,127) (146,643) 1,620 8,973 (42,413) 116 - - - - - (256) 44,310 (69) 44,241 (31,154) (189,056) 1,480 (185,150) (33,324) (256) (218,730) Total (119,697) (54,536) (256) (174,489) 39 Notes to Financial Statements 25. Contingent liabilities The company has entered into cross guarantees in respect of the banking facilities of its subsidiaries.The company has also entered into interest rate floors on £80 million at 4.83% from January 2001 to January 2006, and on a further £80 million at 4.73% from July 1999 to January 2006. Other than these contingent liabilities and the deferred tax referred to in note 19 there were no contingent liabilities at 31 March 1999 (1998 Nil). 26. Capital commitments At 31 March 1999 nil (1998 Nil). 27. Post balance sheet events On 4 June 1999 Helical Bar plc completed the acquisition of Glenlake Ltd, a property investment company owning 60 Sloane Avenue, London, SW3 for £11.9 million. 40 Ten Year Review . 0 9 1 1 3 . . 1 9 1 1 3 . . 2 9 1 1 3 . . 3 9 1 1 3 . . 4 9 1 1 3 . . 5 9 1 1 3 . . 6 9 1 1 3 . . 7 9 3 1 3 . . 8 9 3 1 3 . . 9 9 3 1 3 . 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 1 7 4 7 1 1 , 7 5 7 4 7 , 1 9 0 1 3 , 6 1 8 4 2 , 2 8 9 4 2 , 1 2 5 0 5 , 8 4 9 5 6 , 9 2 5 0 0 1 , 6 1 4 4 1 2 , 4 4 2 1 2 1 , r e v o n r u T 3 7 1 4 1 , 1 7 8 8 1 , 7 4 5 6 1 , 0 1 8 3 1 , 8 1 1 2 1 , 4 9 2 6 1 , 6 8 1 9 1 , 4 7 3 2 2 , 9 0 0 2 2 , 2 8 4 1 2 , e m o c n i l a t n e R 4 0 5 3 3 , 4 6 2 5 2 , 7 2 6 1 1 , 5 9 8 6 1 , 3 1 7 2 1 , 5 7 4 6 1 , 7 9 6 1 2 , 4 8 2 9 2 , 5 7 7 8 3 , 4 0 0 9 3 , t i f o r p s s o r G 0 9 3 4 1 , 8 7 8 2 , ) 7 5 5 7 ( , 2 8 8 5 , 8 7 5 6 , 7 8 1 8 , 0 0 2 9 , 3 3 0 2 1 , 4 9 4 8 1 , 4 4 0 0 2 , n o i t a x a t e r o f e b ) s s o l ( / t i f o r P 6 2 5 8 , 6 5 5 2 , ) 8 8 2 6 ( , 2 3 6 5 , 9 4 0 6 , 5 5 6 7 , 2 9 8 7 , 2 3 0 9 , 0 1 6 4 1 , 5 4 1 6 1 , n o i t a x a t r e t f a ) s s o l ( / t i f o r P 0 7 6 1 , 6 3 6 1 , 5 5 6 3 8 7 4 4 9 8 5 0 1 , 9 8 1 1 , 6 6 6 1 , 2 5 5 1 , 8 3 3 1 3 , s d n e d v d i i y r a n d r O i 1 8 3 4 , ) 9 3 3 ( ) 8 1 7 7 ( , 1 5 9 3 , 1 5 4 3 , 5 8 7 3 , 6 6 6 3 , 4 6 5 3 , 5 8 9 7 , ) 1 6 6 8 1 ( , i d e n a t e r t i f o r p / ) s s o L ( p 0 0 1 . p 0 0 1 . p 0 4 . p 8 4 . p 8 5 . p 5 6 . p 3 7 . p 0 8 . p 0 9 . p 0 0 1 . e r a h s y r a n d r o i r e p d n e d v D i i - - - - - - - p 0 2 . - . p 0 0 0 1 e r a h s y r a n d r o i r e p d n e d v d i i l i a c e p S p 9 3 3 . p 9 7 . ) p 2 3 4 ( . p 0 9 2 . p 3 4 2 . p 3 6 2 . p 6 6 2 . p 3 8 2 . p 9 0 4 . p 7 0 5 . e r a h s y r a n d r o i r e p i s g n n r a e d e t u l i D 3 4 6 9 6 , 2 2 6 3 5 , 4 3 6 5 4 , 0 8 1 6 4 , 7 4 7 3 8 , 9 2 4 1 9 , 2 6 6 2 9 , 4 6 6 5 0 1 , 2 8 9 8 3 1 , 4 2 5 1 4 1 , s d n u f l ' s r e d o h e r a h S p 4 3 3 p 8 5 2 p 0 2 2 p 4 2 2 p 9 9 2 p 6 2 3 p 0 3 3 p 2 7 3 p 2 8 4 p 3 7 4 e r a h s r e p s t e s s a t e N 41 Notice of Annual General Meeting Notice is hereby given that the seventy-ninth Annual General Meeting of the Company will be held at The Westbury, Conduit Street at New Bond Street, London W1A 4UH on Wednesday 21 July 1999 at 11.30 a.m. for the following purposes As ordinary business 1. To receive and consider the directors' report and the financial statements for the year ended 31 March 1999. 2. To declare a final dividend of 6p per ordinary share of 5p. 3. To re-elect Mr J P Southwell, who retires by rotation, as a director of the Company. 4. To re-elect Mr C G H Weaver, who retires by rotation, as a director of the Company. 5. To re-appoint Grant Thornton as auditors to the Company and to authorise the directors to fix their remuneration. As special business To consider and, if thought fit, to pass the following resolutions of which resolutions 6, 7 and 8 will be proposed as ordinary resolutions and resolution 7 will be proposed as a special resolution: 6. That the authorised share capital of the Company be and it is hereby increased to £40,126,626.60 by the creation of 11,000,000 ordinary shares of 5p each ranking pari passu in all respects with the existing ordinary shares of the Company. 7. That the directors be and they are hereby generally and unconditionally authorised, pursuant to Section 80 of the Companies Act 1985, to exercise all powers of the company to allot relevant securities (as defined in Section 80 of that Act) of an aggregate nominal amount of £493,528 provided that this authority shall expire on 20 July 2004 save that the company may before said expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the directors may allot relevant securities in pursuance of such offer or agreement as if the authority conferred hereby had not expired. 8. That the directors be and are hereby empowered, pursuant to Section 95 of the Companies Act 1985, to allot equity securities for cash (as defined in Section 94 of the Act) pursuant to the authority conferred by Resolution 6 above as if Section 89 of that Act did not apply to any such allotment provided that this power shall be limited to: a) the allotment of equity securities for cash in connection with a rights issue in favour of ordinary shareholders on the register of members at such record date or dates as the directors may determine for the purposes of the issue where the equity securities respectively attributable to the interests of all ordinary shareholders are proportionate (as nearly as may be) to their respective entitlements at such record date or dates so determined provided that the directors may make such arrangements in respect of overseas shareholders and in respect of fractional entitlements as they consider necessary or expedient; and b) the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities for cash up to an aggregate maximum nominal amount of £74.029; and shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution, or on 30 September 2000, if earlier, save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not expired. 9. That the Company is hereby generally and unconditionally authorised to make market purchases (within the meaning of Section 163 of the Companies Act 1985) of ordinary shares of 5p each in the capital of the Company ('ordinary shares') provided that: a) the maximum number of ordinary shares hereby authorised to be purchased is 2,961,169; b) the maximum price which may be paid for an ordinary share is an amount equal to 105 per cent of the average of the middle market quotations for an ordinary share as derived from The Stock Exchange Daily Official List for the 5 business days immediately preceding the day on which the ordinary share is purchased; 42 Notice of Annual General Meeting c) the minimum price which may be paid for an ordinary share is 1p; d) the authority hereby conferred shall be in lieu of any existing authority conferred by ordinary resolution to purchase ordinary shares (but without prejudice to any purchase of ordinary shares previously made pursuant to such authority); e) the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution, or 30 September 2000 , whichever is the earlier, unless such authority is renewed prior to such time; and f) the Company may make a contract to purchase the ordinary shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiry of such authority and may make a purchase of ordinary shares in pursuance of any such contract. By order of the Board T J Murphy Secretary 28 June 1999 Registered Office 11/15 Farm Street London W1X 8NP Registered No. 156663 43 a) Holders of Ordinary Shares are entitled to attend and vote on all the resolutions proposed at the Annual General Meeting. If b) Any member entitled to attend and vote is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him. Any such proxy need not be a member of the Company. you are unable to attend the Annual General Meeting please complete and return, the white form of proxy so as to reach IRG plc, Proxy Department, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4BR as soon as possible and in any event so as to reach there not later than 48 hours before the time appointed for holding the meeting. c) Copies of the directors’ contracts of service will be available at the registered office of the Company during normal business hours on any weekday (Saturday and public holidays excluded) from the date of this notice until the date of the meeting and will then be available for inspection at the place of the meeting 15 minutes prior to and during the meeting. d) The register of directors’ shareholdings and transactions will be available for reference at the commencement of and during the continuance of the meeting. e) Completion of the form of proxy will not preclude a person from attending and voting in person. f) Entitlement to attend and vote at the meeting will be determined by reference to the Register of Members of the Company at midnight on 19 July 1999. Notes 44 Financial Calendar Year ended 31 March 1999 Annual General Meeting to be held Final ordinary dividend payable Special dividend - final 50p payable 21 July 1999 23 July 1999 29 October 1999 Half year ending 30 September 1999 Results and interim ordinary dividend announced Interim ordinary dividend payable November 1999 January 2000 Year ending 31 March 2000 Results and final dividend announced Final ordinary dividend payable June 2000 July 2000 Designed and produced by Milton PDM, Windsor. Printed by Newgate Press Ltd. 

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